Economics Textbooks: Teaching to Despise

After sporadic complaints that have been voiced for years, fresh concern is being expressed by German and French business circles and some intellectuals about the economics courses in secondary schools and to a lesser extent in the universities. Textbooks used in secondary schools are accused of being tendentious, calculated to persuade the young that the capitalist economy is an engine of instability, disorder, gross inequality and injustice.

Textbook publishers say, in their defence, that they publish what the teaching profession demands. Teachers have wide freedom to choose the course books that pupils are more or less obliged to buy. Teachers almost naturally lean left, though there is always a minority of stalwarts to hold out against the spirit of the profession. The leftist bias is "natural" in the sense that teachers as a class are probably more brainy and certainly more educated than the vast bulk of people in other occupations who earn comparable or even higher incomes. Teachers, then, feel underpaid and badly done by in what they regard as the capitalist system. Such a system is despicable and in order to help replace it by a better one, teachers want the young to despise it, too.

It is, of course, far from nonsense to argue that teachers are underpaid. However, it is a mistake to ignore that at present pay levels in Europe, there are no more unemployed teachers than unfilled vacancies. Apart from imbalances in certain locations and subjects, overall supply and demand are equal. Generally higher pay would therefore almost inevitably mean teacher unemployment, for more people would opt for the profession than there was place for. Remedying that would involve building more schools, having smaller classes and raising the compulsory school-leaving age—one more dose of tax-and-spend (or rather spend-and-borrow) medicine that is obstinately administered to cure society's varied ills.

Back to the textbooks, then, that seem destined to remain tendentious as long as teachers feel wronged by the existing order of things. I have argued here before that peoples in the Northern half of Europe have an innate understanding of the most basic economic verities, including how wealth is created and what the state can and cannot do, while in the Southern, Latin and Catholic half there is a gut feeling against enterprise and profit and a thick fog of confusion about how an economy works. Most present-day teaching upsets the natural understanding and makes the confusion worse.

Teaching economics at secondary school level is relatively recent. It is meant to make education more "real"; finding out how "untrammelled" free trade leads to job losses is more "relevant" than learning to speak their own language without massacring its grammar, let alone studying Livy or Ovid to practice close reasoning. Economics at secondary school level is liable to be descriptive if not downright anecdotal. It is likely to produce just that little bit of knowledge that is worse than none.

The teaching profession defends itself by invoking impartiality. They teach that there are dark Satanic mills where women and children toil for starvation wages, that the caprices of the market can create waste and that in modern-day monetary disorder, currencies go up and down at the pleasure of cosmopolitan speculators. It is necessary, and only fair, to show pupils that capitalism and its "wildest" version in "mondialisation," has its dark side. It might be pertinent to add that if women and children did not work for starvation wages, they would presumably starve, and that the value of capitalism lies not in what it is, but in the difference it makes.

"Impartial" economics taught to adolescents relies heavily, though not always explicitly, on a number of very basic propositions that look so plausible that they pass for self-evident. Three of them seem to me particularly insidious. I will call them the distribution-independence, the worker-defence, and the property "rights" thesis.

High school textbooks teach that capitalism, leaving as it does the distribution of income to the free play (or, as some will say, the caprice) of the market, generates inequality. It goes without saying that inequality is bad both because it is "socially" unjust and because it reduces the aggregate "utility" derived from aggregate income. Therefore society must reduce inequality by "appropriate" policies.

For modern theory, nearly all of the above is undiluted bilge. Few university-level economists will still invoke aggregate utility. Perhaps the worst part of the thesis, though, is the implicit idea that if you change the distribution of income, its total rests unchanged. The national income is not an irrigation network where you can reduce the flow of water into one ditch and increase it in the other. The tacit supposition that income is independent of its distribution is absurd, yet it is just as plausible to the untutored mind as the idea that the earth is flat is plausible to all who trust their eyes and have never been told the contrary.

An equally plausible notion taught in schools is that employers, naturally strong, would abuse workers, naturally weak, if "workers' rights" were not defined, extended and bolstered by legislation. Minimum wages, a "legal" work week, "legal" limits on overtime, strike "rights," and the legal immunity of unions are but a few high trunks in the dense thicket of labour legislation whose total volume may reach several thousand pages (as it does in France). Employers feel lost in the thicket, but what matters is that without it, employees would be lost in the capitalist jungle.

The dominant effect, albeit only one of several, of the defence of "workers' rights" is to create excess supply in the labour market by making employers shun the increased risk of hiring. Labour's bargaining power is drained off as a result. Even some trade unions (e.g. in Spain) have started to recognize the effect of labour legislation in causing unemployment and depressing wages. But for most of semi-educated public opinion, it is self-evident that defending workers' rights must be good for the workers. The young learn in school that it is by affirming workers' rights that we tame capitalism and "ultra-liberal" pipedreams.

A third one of these prize specimens of self-evidence is that property is a "social construction." Owners hold what they do by the grace of society that has created property "rights" in the first place. The government, society's agent, is protecting them against all comers (except, obviously, against itself). In what is admittedly a somewhat involved chain of tacit reasoning, those who speak of "property rights" when they mean property, show a symptom of having assimilated the "self-evident" truth that what owners have are "rights" conferred upon them by "society" and enforced by its power.

In reality, property "rights" do exist. They are generated by contracts and matched by the corresponding contractual obligations. Lending and borrowing, mortgages, leases, partnerships, insurance policies, options and other derivatives represent property "rights." They are derivatives of property, and are offset by the corresponding obligations of counter-parties as assets are offset by liabilities. Underneath it all is the residual net equity, the pure property. Confusing it with property "rights" gently guides teenage reason toward the legal system of which these "rights" are a part and which is created and upheld by society's agent, the state.

However, straightforward chronology tells us otherwise. Property originated with the cave-man or, more pertinently, the cave-woman who have evolved the notions and rules of mine, thine, ours and theirs. Customs of gift-giving and legacy and conventions like queuing, first-come-first-served and "finders, keepers" strengthened the functions of property, and the development of voluntary exchanges has laid the foundations of society. All this has manifestly preceded anything resembling a state and a legal system upheld by it. Capitalism may well be the outgrowth of property, and trading. Whether it has unlovely or despicable aspects is a matter of taste. Property may well be dependent on the tolerance of society, for this is in the last resort a question of who sets and enforces the rules. But at least let us not teach the young that the dependence on political power is legitimate.

*Anthony de Jasay is an Anglo-Hungarian economist living in France. He is the author, a.o., of The State (Oxford, 1985), Social Contract, Free Ride (Oxford 1989) and Against Politics (London,1997). His latest book, Justice and Its Surroundings, was published by Liberty Fund in the summer of 2002.